Government To Retain, But Reform, The 'Groundless Threats' Regime For IP Disputes

The government has supported the Law Commission’s recommendation that the regime for groundless threats in relation to patent, trade mark and design rights cases should be retained, but reformed.

A threat is treated as ‘groundless’ where there is no actual infringement nor intention on the part of the accuser to follow up with legal action against the alleged infringer, or the threat is made in respect of a right which is unenforceable (e.g. because the right is invalid). Remedies for groundless threats include a declaration that the threat is unjustified, an injunction to stop the threats continuing, and damages.

The rules were originally introduced to stop rights owners from misusing their rights and making threats of proceedings without justification, often with the aim of stifling competition. The UK is the only country in the EU (except for Malta) that has these provisions. There has been long standing criticism that the provisions are overly complex, especially with regard to the different levels of protection between the different IP rights.

The provisions do not sit squarely with the CPR that encourage parties to resolve their differences without resorting to litigation and where costs consequences may follow from a failure to do so. One of the effects of the legislation is that rights holders may feel pushed to issue proceedings without sending a warning letter so as to avoid a claim of groundless threats.

Last year the Law Commission published a report which contained various recommendations to address the threats provisions and to counter the criticisms from stakeholders. The government has now responded to this report, highlighting a number of reforms that should be taken forward.

In summary, the government recommends:

- That protection against groundless threats should be maintained, and the laws relating to design rights and trade marks should be brought into line with those relating to patents (the rules relating to patents were changed in);

- A groundless threats action should not be brought for threats to bring proceedings against a “primary actor” (the person who is responsible for e.g. making, importing, or supplying services under a trade mark);

- Communications with “secondary actors” (e.g. retailers/suppliers of infringing goods) should be permitted where there is a ‘legitimate commercial purpose’ behind the communication (such as a genuine attempt to locate a primary actor);

- A legal or professional adviser should no longer be jointly liable for making threats where they have acted in their professional capacity and on instructions from their client.

The government will now discuss the proposals further with the Law Commission with a view to agreeing wording for a draft Bill.

Georgie Collins, IP Partner at Irwin Mitchell, said:

Expert Opinion

These recommendations are certainly a move in the right direction, and will ensure that there is more consistency and less complexity in relation to a rights owner asserting claims of trade mark, patent and design right infringement.

“However, in our view they do not go far enough; the provisions only relate to registered rights and do not extend to copyright, database rights and/or passing-off which means there is an uneven playing field as between various IP rights which can result in prejudice in certain scenarios. Take the example of a website takedown; ISP’s will often react to a letter alleging copyright infringement by quickly removing access to the site, which then leaves the site owner facing a battle to have the site reinstated and no recourse (in the context of groundless threats) of whether the initial threats were justified or not.

“The European Commission has said that it might be necessary to consider the separate tort of unfair competition, which would bring the UK more into line with some of its European counterparts.”

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